Q. I've been looking at some venture capital sites for my "green" technology concept. You could say I'm a little green too because I've never asked anyone for money before and don't want to embarrass myself. Here's something I'm not sure about. Some funds say they are "early stage" investors and some funds say they are "startup" investors. Does this mean the same thing?
A. I like your question and agree that the process of asking strangers for money can be intimidating.
Here's a little comfort for you. Entrepreneurs who are most likely going to make embarrassing beginner's mistakes in front of investors are the ones who are so arrogant that they don't ask questions! But you do, so you are ahead in the game of venture fundraising.
Yes, there is a difference between investors who prefer to invest in raw startups and investors who write checks to "early stage" companies. The differences are subtle and not at all absolute.
Here are some attributes of early stage companies:
- Have a corporate organization in place, typically a "C" corporation
- Received one or more prior rounds of funding from company founders, their families or local angel investors
- Filed patent applications
- Developed a successful product or service prototype. A prototype could also be a profitable restaurant that has the brand power to expand nationally or regionally
- Have some impressive evidence of first adopters or customers for the company's technologies, products or services.
- Have a clearly defined commercialization strategy or "business model" in place
Sometimes well-established early stage funds will selectively consider startup or "seed-stage" companies if their technologies are backed by a university or other strategic partner that will help accelerate market entry post funding.
Fund managers may also be a little more lenient with seed-stage companies that are located close to the venture fund's headquarters. It's just easier for fund managers to meet regularly with entrepreneurs during the tricky trial and error period of startup product development. At TakeCommand, you will find clean tech funds that invest in seed, early, expansion and even buyout stage clean tech companies.
Some early stage investors include I2BF Global Ventures, Khosla Ventures, Virgin Green Fund, Kleiner Perkins, Venrock Associates, Energy Ventures Group, Generation Investment Management, Sierra Ventures, and Nth Power. There are dozens of other early stage and seed stage clean tech investors. Even corporations like Google and General Electric are active "in the space" too.
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Susan Schreter is a 20-year veteran of the venture finance community, MBA-level educator and policy advocate for small business owners. Her work is dedicated to improving startup operating performance with reduced personal risk to entrepreneurs. She is the founder of www.takecommand.org, which offers the largest centralized database of regional and national small business funding sources in the U.S., including angel clubs, micro-finance lenders, venture capital funds and more. Follow Susan on Twitter @TakeCommand